Gold-Backed Petro-Yuan China’s Not-So-Secret Trade War Nuclear Weapon

In journalism, it’s called “burying the lead.” When the most salient information or powerful point is left until the end of the article.

The absurdist posturing and chest-puffery on both sides, so far, hasn’t amounted to much. The US announces tariffs, but then gives 60 days for “public feedback”. China announces its own tariffs. But they won’t take effect until ours do. It’s a stupid, pointless, bravado-based game of economic chicken.

The gold-backed petro-yuan has the potential to be weaponized by China, and in a hurry. If and when there is actual blood drawn in this war of words, China now has an active mechanism to truly challenge worldwide dollar hegemony. A trade war could be just the thing to get them to deploy massive resources to accelerate the process.

If China truly wants to demonstrate this a battle of economic equals, that is their ace in the hole.

Chinese state media hailed their leaders’ quick counteroffensive in the brewing trade war with the U.S. and said America would learn a “painful lesson” by tangling with China.

“As China deploys its counterattack, the pleasure that the U.S. achieved from those tariffs will now cause them suffering as their financial and political gains diminish to zero,” the Global Times wrote in an editorial Thursday. The tabloid, which sometimes takes more hawkish positions, has run five editorials on the trade issue since Monday.

China said on Wednesday said it would levy an additional 25 percent tariff on about $50 billion of U.S. imports, matching the scale of proposed U.S. tariffs announced the day before. The U.S. is allowing 60 days for public feedback, leaving room for talks. China has said its tariffs will take effect when the U.S. ones do.

The People’s Daily, the Communist Party’s mouthpiece, hailed the quickness of China’s reciprocal tariffs, saying “China showed its sword in less than 24 hours with a reaction that even the Americans must not have anticipated.” It devoted three pages in Thursday’s edition to coverage of the tit-for-tat tariffs.

The paper said that Sino-U.S. ties were no longer that of David and Goliath, but of two equally matched giants, and that President Donald Trump’s incitement of a trade war was out of step with global sentiment. The daily’s correspondents based in the U.S. filed an article about how businesses and consumers in the U.S. opposed Trump’s tariffs.

The Global Times said China had many more weapons in its arsenal to deploy against the U.S. in the event of a trade war. It could devalue its currency, or promote the yuan as an alternative to the dollar in the global financial system.